‘Unless we win the lottery’: Is it cheaper to rent or buy in Canberra?

Renting a house in Canberra is more affordable than buying one, according to a new report. 

New data from Domain, released on Thursday, compared mortgage repayments to rents across the country, and found renting a house in the capital was a more cost-effective choice than purchasing one. 

The data used mortgage repayments based on the median house or unit price for the city – assuming an interest rate of 4.93 per cent and a 20 per cent deposit – with no further costs included. This was compared to the current median house or unit asking rent.

According to the report, buying a unit proved to be more affordable in only 39.3 per cent of Canberra suburbs, while renting was more affordable in the remaining 60.7 per cent.

For Kaylah Faulkner and her partner, the choice to rent a house was more economically appropriate, and they don’t have any regrets. 

“My partner and I looked at the perfect time … we weren’t in a rush to move out but wanted our own space,” she said. 

“The condition is great, maybe a little dated with the curtains and the carpet, but there is really nothing to complain about.” 

They are paying $423 a week for a two-bedroom townhouse in Lyneham.

Faulkner said sticking with her current rental or looking to rent elsewhere in the foreseeable future were the only realistic options for the couple. 

“We would love to buy, but unless we win the lottery, we will have to be sticking to rentals for a while,” she said. 

“It’s disappointing we can’t buy in the near future, but we are still young and, realistically in this market, we’ve accepted it’ll be far off until we are in a position to buy.”

The median price for houses in Canberra currently sits at $1,096,144, while the median for units is $572,824.

This time last year, assuming an interest rate of 2.3 per cent and a 20 per cent deposit, it was cheaper to rent a house in 45.1 per cent of Canberra suburbs, while 54.9 per cent of suburbs were cheaper to buy in. 

For units, it was more affordable to purchase in 93.3 per cent of suburbs and cheaper to rent in the remaining 6.7 per cent. 

Domain chief of research and economics Dr Nicola Powell said the main cause of this change was the increase in the mortgage rate over the year. It currently sits at 4.93 per cent, up from 2.3 per cent year-on-year. 

“House and unit prices have both risen over the past year with a varied degree of increases across the suburbs … some would have had extreme rates of growth while others would have been more moderate,’ she said.

“I think the change is a result of a combination of escalating property prices and the fact that we have seen an increase in those home loan rates as well. 

“With such a high median house price for Canberra, still being over $1 million, coverage of a weekly mortgage because of this steep growth far outweighs what we have seen for rents over this time.” 

The latest Domain Rent Report revealed that Canberra’s median weekly asking rent for houses was now $680, a $10 drop from the previous quarter. 

Property manager Brooke Lloyd of Canberry Properties said she had seen asking rents drop in recent months as tenants were encouraged to consider certain properties. 

Landlords who were working through lease renewal were having to stall rent rises to keep up with the market, she added. 

“The properties we found were getting quite high prices 12 months ago and are realistically having to ask for about $50 less now,” Lloyd said. 

“We are telling landlords who are renewing their leases, ‘We think it’s the best idea to keep your property at the current price because there are cheaper properties on the market now, and it would be better to keep your tenant.’

“We are really case-by-case with each property at the moment because people are looking for a better deal with the properties currently on the market.”